I'm the founder of Prisonology.com, which is a web-based product to help defendants prepare for prison. I hope you never need it! I write on white-collar crime and try to provide a different perspective than that of the mainstream media. I co-authored "Stolen Without A Gun" with Neil Weinberg, former Executive Editor Forbes Magazine (now a Reporter for Bloomberg). On a good day, I'll be talking with some bright defense lawyers or writing for Forbes.

The Madoff-Five Never Had A Chance And You Paid For It

The trial of five former Madoff employees, which started in October 2013, ended yesterday with a verdict of ‘Guilty.’ There are Broadway plays that have not lasted that long!

There was no surprise that Annette Bongiorno (66), Joann Crupi (53), Daniel Bonventre (67), George Perez (48) and Jerome O’Hara (51) were all found guilty. Some may have wondered why they even went to trial at all and did not instead seek some sort of leniency by pleading guilty, as nearly 97% of all federal defendants end up doing anyway. The fact is that there was no incentive to plead guilty because the deals being offered, number of years in prison, by prosecutors were not worth it to these defendants. Of course deals were offered … but if that deal was going to prison for life, why not take a stab at winning at trial.

The way the justice system works is that the first person to plead guilty usually gets the best deal. In this case, the first guy to the courthouse to plead guilty was Bernie Madoff himself who accepted responsibility for his crime and also, for some unknown reason, said that he was the sole person responsible. U.S. District Judge Denny Chin, gave considerable thought to what Madoff’s sentence should be and in June 2009 sentenced him to 150 years in prison. So that was not a good start for those who would follow but it served as a warning for what was to come for those who were involved in the Madoff scam.

So with Madoff in the can, the competition among the remaining criminal targets of the Ponzi scheme heated up. In August 2009, Frank DePascali, Madoff’s finance chief, pleaded guilty. He had the goods on everyone in the office and would take the stand pointing his finger at all the defendants during the trial for their role in the fraud. David Friehling, Madoff’s accountant, pleaded guilty in November 2009 and testified that he blindly signed off on tax returns. Enria Cotellessa-Pitz, controller for Madoff, would plead guilty in 2011 and she too would testify that Bonventre hid trading losses by taking money from Madoff’s investment advisory business. David Kugel, a trader for Madoff, pleaded guilty in November 2011 and testified that he provided historical trading information to Bongiorno and Crupi so that they could make up realistic fake trading reports. Peter Madoff, who pleaded guilty for actions for criminal actions just prior to disclosure of the scheme, got a 10-year prison term and did not cooperate by testifying at the trial. According to a BloombergBloomberg report, all of those listed here who pleaded guilty said that they had no idea that Madoff was running a Ponzi scheme but they were able to cooperate against these five defendants who did. Really? In other words, the people who orchestrated the fraud, the enablers of the largest Ponzi scheme in history, were the ones cooperating against these small fish who knowingly carried out the scheme through their back office scheming. The truth is, these five defendants had nobody to turn on, so any potential deal they were offered would probably meant facing decades in prison … a life sentence.

With the choice of life in prison or fighting for the chance, albeit a small one, at being acquitted at trial, the Madoff Five made there way to the courtroom. The cost for defending a white-collar criminal case can be enormous. There are defendants who have pleaded guilty early on in investigations and pay over $200,000 just to get the best deal to start their prison term. Others, like the well-heeled convicted insider trader Raj Rajaratnam, spent nearly $40 million on his defense in 2011. He lost and is currently in federal prison serving an 11 year prison term. So how did the Madoff Five afford their legal defense in a trial that lasted nearly 5 times longer than that of Rajaratnam’s? Tax payers paid for it.

According to PACER, all of the Madoff defendants with the exception of Crupi had court appointed attorneys … for a 5-month long trial that has had years of preparation time. The defense and prosecution of this case not only cost the tax payers millions, it will end up sending those who were following orders, the lowest level employees, to prison for life terms. Oh, and then there’s the appeals that are sure to follow for each of the defendants. Justice, the gift that just keeps on giving.

The Madoff Five were found guilty and I, like most people I have talked with about the case, think they are guilty. In fact, it seems crazy that it took the government over 4 months to present their side of the case. Those found guilty should be held accountable for their actions and the great harm that they caused. However, there were so many people and banks involved that allowed this fraud to occur, most notably JPMorgan that recently agreed to pay victims of the scam $218 million for their role (lack of oversight) in the scheme. Could there not have been some deal, some number of years in prison that could have been offered to these five defendants to not only serve justice but save the millions this trial cost tax payers? 10 years? 15 years?

Some may argue that seeking justice should not be influenced by the dollars it takes to try a case. That might be true, but wait until you see the years these 5 underlings get compared to the years their bosses get for throwing them under the bus. This all could have been avoided, but the offer from prosecutors just was not there to make it happen.

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